Question

Fortes Inc. has provided the following data concerning one of the products in its standard cost system. Variable manufacturing overhead is applied to products on the basis of direct labor-hours.

Inputs Standard Quantity or Hours per Unit of Output Standard Price or Rate
Direct materials 8.0 ounces $ 8.10 per ounce
Direct labor 0.5 hours $ 24.70 per hour
Variable manufacturing overhead 0.5 hours $ 6.40 per hour
The company has reported the following actual results for the product for April.Actual output 6,500 unitsRaw materials purchased 62,350 ouncesActual cost of raw materials purchased $386,210raw materials used in production 52,020 ouncesActual direct labor hours 3,450 hoursActual direct labor cost $88,880Actual variable overhead cost $21,295Required:a. Compute the materials price variance for April.b. Compute the materials quantity variance for April.c. Compute the labor rate variance for April.d. Compute the labor efficiency variance for April.e. Compute the variable overhead rate variance for April.f. Compute the variable overhead efficiency variance for April.

Answer 1

Material price variance = $118,825 F

Material quantity variance = 162 U

Labor rate variance = $3,665 U

Labor efficiency variance = $4,940 U

Variable overhead rate variance = $785 F

Variable overhead efficiency variance = $1,280 U

Explanation:

As per the data given in the question,

a)

Material price variance = ($8.1 × 62,350 - $386,210)

= $118,825 F

b)

Material quantity variance = (6,500 × 8 - 52,020) × $8.1

= 162 U

c)

Labor rate variance = ($24.70 × 3,450 - $88,880)

= $3,665 U

d)

Labor efficiency variance = (6,500 × 0.5 - 3,450) × $24.70

= $4,940 U

e)Variable overhead rate variance = ($6.40 × 3,450 - $21,295)

= $785 F

f)

Variable overhead efficiency variance = (3,250 - 3,450) × $6.40

= $1,280 U

If the actual cost is more than the standard cost that it would leads to unfavorable variance else it is a favorable variance